Question: Residual Operating Income Valuation, Nike, Inc., 2004 {Medium) At the end of its 2004 fiscal year, the 263.1 million outstanding shares of Nike, Inc., traded at $75 each. The following summary numbers are from the 2004 financial report (in millions of dollars).
a. Calculate the levered and unlevered (enterprise) price-to-book ratios at which Nike traded at the end of fiscal year 2004.
b. Calculate residual operating income for 2004 using beginning-of-year balance sheet amounts. Use a required return of 8.6 percent: for operations.
c. Calculate return on net operating (RNOA) assets for 2004.
d. With this RNOA, forecast operating income and residual operating income for 2005.
e. Calculate the value of a Nike share if the residual operating income you forecasted for 2005 is expected to grow at a 4 percent annual rate after 2005.